Ray Lane: Is he HP's agent of change?

FRANCISCO: When Ray Lane took over as chairman of Hewlett-Packard Co a year ago, he was looking forward to working with longtime associate Leo Apotheker, who had just been appointed CEO to repair the damage done by the messy departure of Mark Hurd.

Little did he know that he would soon be presiding over another ugly CEO transition and drawing withering criticism for what investors and analysts viewed as incompetence on the part of the HP board.

Now, as executive chairman, the respected Silicon Valley veteran and Kleiner Perkins Caufield & Byers venture capitalist has his reputation on the line as he tries to get the iconic computer maker back on track.

While many of the events that have made HP a poster child for mismanagement and board dysfunction preceded Lane's arrival in November 2010, his year-long stint has had more than its share of drama.

Lane, 64, signed off on a nearly $11 billion acquisition of software maker Autonomy that was widely panned by investors, and he stood by while Apotheker spooked Wall Street by floating the possibility of a spin-off of the huge personal computer division. Lane quickly found himself the public spokesman for the controversial new strategy.

When it became clear that the CEO had lost his credibility, Lane and the board fired Apotheker in September, letting go a man he has known for 20 years.

At the same time, HP added "executive" to Lane's chairman title and, without a formal search, appointed board member and former eBay Inc chief Meg Whitman as CEO, despite her lack of experience in enterprise computing.

Lane stands by those decisions. "It was hard with Leo," he told Reuters in an interview earlier this month. "You have to have a consensus that it's the right move for the business. Once you do, you can't sit around on it, you've got to do it. You've got to be clear. That's what I do."

On Thursday, Lane added another member to HP's board, activist investor Ralph Whitworth whose firm Relational Investors bought a small stake in the company.

Conversations with current and former colleagues of Lane paint a picture of a plain-speaking and decisive executive who is not afraid to get his hands dirty.

When HP dismissed Apotheker, Lane minced no words in describing his associate's failings. On a conference call with Wall Street analysts, Lane said the former CEO did not dig deep into the business to understand its dynamics, could not execute operationally, missed Wall Street expectations for two straight quarters, and was poor at communicating strategy.

"This is a board who objectively evaluated whether he was the right guy to operate the business. And we came to the conclusion he was not," Lane said at the time.

RIGHTING THE SHIP

Lane describes his role at HP as that of a consultant and is eager to dispel any notion that he is running operations. He had turned down HP when he was approached as a possible CEO candidate, after Hurd was ousted in August last year.

Nonetheless, Lane is clearly devoting a lot of his energy to the tech company. He said he meets with Whitman once a week, and they talk on the phone about three times a week.

"I don't drive the software strategy at HP," Lane told Reuters. "I can afford to give her some time. She knows that I know software and services."

The two tech veterans go way back to when Lane was at Oracle and helped Whitman solve a systems crash at eBay in 1999 that rendered the auctions site inaccessible for 22 hours.

Lane also supported Whitman, a Republican, in her unsuccessful run last year to become California's governor. She made it a condition of taking the CEO job that Lane spend time helping her, at least for a while, and she seeks his advice on anything from strategy to hiring of senior executives.

"He has a gut feel for things and his gut is very experienced," Whitman told Reuters. "He will basically say 'Listen, here's the three things that ought to be worked on'."

The duo have already decided to scrap the idea of spinning off HP's PC division, saying it did not make strategic or financial sense. Wall Street has given cautious approval - HP's stock has gained about 20 percent since Apotheker's exit, after losing nearly 44 percent in the 10 months of his tenure.

Criticism of the board has subsided for now, as investors give the new team some time to try to prove themselves.

"We would like to see management make objective allocation of capital. Don't make any more dumb acquisitions. Don't overpay," said Don Yacktman, founder of Yacktman Asset Management Co in Austin, Texas, which oversees $11 billion and holds HP shares.

RISING THROUGH THE RANKS

Lane grew up in Pennsylvania and received a math degree from West Virginia University. He got his start in the corporate side of the computer business, working in sales and product management for IBM, then jumping to Ross Perot's EDS before building and running a technology unit for Booz Allen Hamilton.